Saving money is perhaps the toughest thing for majority of the people across the globe. Even well-qualified adults do know how to save money the right way. They rather spend more than they had bargained and during retirement age, end up being a pauper. This is because of lack of understanding or not being aware of how to save. It is a wrong perception that people do not want to save. You just need to know how to do it every month so that you can enjoy your bad days and retirement life.
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6 simple, but realistic ways to save money
1. Earmark budget for savings:
Firstly, list your monthly expenditures. Organize recorded expenses, converting them into workable budget. It should clearly outline your income and expenses, thereby ensuring you do not cross your spending limits. Include savings category. Try to save at least 10% to 15% from your total income.
2. Record expenses:
Make sure to fact all expenses taking place on a daily basis and not monthly. This will help you to know where your money is going and track it every single day. It also means cash tip, household items and coffee that you spend upon. Once data is ready, organize numbers in different categories like mortgage, groceries, gas. Then, total each amount. Ensure you record bank and credit card transactions correctly. You can take the help of spending tracker tool available for free on the web to help boost your savings effort.
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3. Establish clear savings goals & objectives:
Setting a clear goal is perhaps the best way to saving money. Identify the reasons to save. Then, identify the total amount required and calculate the time it will take. List down your long-term and short-term goals. Short-term goals can be for 1 to 3 years. It may include vacation, emergency fund, car down payment, etc. On the other hand, long-term goals should be for over 4 years. It may include home remodeling project, retirement, child’s education, etc. Consider investing the earmarked amount in a safe place like bank, mutual fund or the IRA. However, there are some risks involved with some investment avenues. You need to be aware of that before making the final investment. Ensure your money is safe and secure. Invest only in secure areas if you do not have much money to save.
4. Identify ways to curtail expenditure:
In case you are faced with high expenditure, find out ways and means to reduce it as much as possible. Identify non-essentials like dining out frequently. Also save on some fixed monthly expenses like cell phone and television bills. Cancel auto-renewal memberships and subscriptions not used much. Go through community event listings as you can come across low-cost or free events, thereby reducing entertainment spending. You can prepare something new in the kitchen and excite everyone instead of dining out.
5. Choose the most appropriate savings tools:
Select FDIC-insured deposit accounts to achieve short-term goals like:
- CD (Certificate of Deposit). Here, your money gets locked for a fixed time period at a higher interest rate.
- Savings account
6. For long-term goals:
- Choose securities like mutual funds or stocks. But be careful of your investments in these domains as they are risky.
- FDIC-insured IRAs (Individual Retirement Accounts), considered as tax-efficient savings accounts.
- Determine priorities: The next important step after considering your income and expenses is to allocate properly your savings. Know clearly your long-term goals. Prioritize savings goal to know the areas to start savings.
Considering the above ways to save money will ensure having some amount to meet short-term and long-term expenses.